Social media wisdom from a cave

keskiviikko 28. maaliskuuta 2018

Warren Buffett, one of the planet’s richest men, is a world-class storyteller.

To keep readers hooked, he uses an engaging mix of:

Conversational language

Accountability (with a touch of self-deprecation)

Anecdotes teased out as backstories

Levity

Metaphors, analogies and authentic word selection

His 6,000-word narratives cover the requisite financial housekeeping, but that’s not the endgame of his annual letter to shareholders. Instead, Buffett wants to provide a window into what makes Berkshire Hathaway tick, including its perspectives on the economy, investing and business in general. He also wants you to trust him.

Here are examples of his storytelling techniques:

Conversational language

Their position of power causes many executives to use “corporate-speak,” but Buffett relies on plain talk.

We tend to let our many subsidiaries operate on their own, without our supervising and monitoring them to any degree. That means we are sometimes late in spotting management problems and that both operating and capital decisions are occasionally made with which Charlie and I would have disagreed had we been consulted.

He says this hands-off approach creates an “owner-oriented attitude” that outweighs the periodic downside:

We would rather suffer the visible costs of a few bad decisions than incur the many invisible costs that come from decisions made too slowly—or not at all—because of a stifling bureaucracy.

You don’t need an MBA to understand that Buffett favors nimbleness over micromanaging. He also doesn’t mince words. Here’s his take on hedge funds:

The bottom line: When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds.

Accountability (with a touch of self-deprecation)

Buffett takes ownership for what he bluntly calls “a very expensive business fiasco” in which he coaxed GEICO’s management to create a credit card product. By the time Buffett woke up—his words, not mine—to the mounting losses, GEICO could get only 55 cents on the dollar in unloading its $98 million credit card portfolio.

In the shareholder letter, Buffett lets the world know that accountability for the $44 million mistake rests with him:

GEICO’s managers, it should be emphasized, were never enthusiastic about my idea. They warned me that instead of getting the cream of GEICO’s customers we would get the – – – – – well, let’s call it the non-cream. I subtly indicated that I was older and wiser. I was just older.

Forget the shareholders. Imagine how this mea culpa played with the GEICO executives who had been overruled? There’s something about seeing the big boss fall on his sword that helps everyone move on. That is quintessential Buffett—turning to self-deprecation to disarm detractors.

Anecdotes teased out as backstories

You don’t need 200 pages or 90 minutes on the silver screen to tell a story. Enter the anecdote.

Look at how Buffett sings the praises of the head of Berkshire Hathaway Reinsurance Group.

When Ajit [Jain] entered Berkshire’s office on a Saturday in 1986, he did not have a day’s experience in the insurance business. Nevertheless, Mike Goldberg, then our manager of insurance, handed him the keys to our small and struggling reinsurance business. With that move, Mike achieved sainthood: Since then, Ajit has created tens of billions of value for Berkshire shareholders. If there were ever to be another Ajit and you could swap me for him, don’t hesitate. Make the trade!

Note the frank recognition of failure—"struggling reinsurance business”—with yet another dash of self-deprecation.

As a second example, he challenges the hedge fund jockeys:

Subsequently, I publicly offered to wager $500,000 that no investment pro could select a set of at least five hedge funds—wildly-popular and high-fee investing vehicles—that would over an extended period match the performance of an unmanaged S&P-500 index fund charging only token fees. I suggested a 10-year bet and named a low-cost Vanguard S&P fund as my contender. I then sat back and waited expectantly for a parade of fund managers—who could include their own fund as one of the five—to come forth and defend their occupation. After all, these managers urged others to bet billions on their abilities. Why should they fear putting a little of their own money on the line?

What followed was the sound of silence. Though there are thousands of professional investment managers who have amassed staggering fortunes by touting their stock-selecting prowess, only one man—Ted Seides—stepped up to my challenge.

Levity

Humor, too, has a disarming effect.

Buffett recognizes this dynamic. He’s also keenly aware that if he wants to hold the reader through 20 pages, he’d better entertain as well as inform.

Charlie’s reaction at the time: “Are we supposed to applaud because the dog that fouls our lawn is a Chihuahua rather than a Saint Bernard?”

When he explains that the social activities at the shareholders’ meeting include a 5K run, he quips:

Entrants in the race will find themselves running alongside many of Berkshire’s managers, directors and associates. (Charlie and I, however, will sleep in; the fudge and peanut brittle we eat throughout the Saturday meeting takes its toll.)

To pull the reader through the narratives, Buffett peppers his letters with zingers:

Charlie and I enjoy issuing Berkshire stock about as much as we relish prepping for a colonoscopy.

Buffett leans heavily on metaphors and analogies to create a more inclusive experience. Notice how he explains a philosophy to zig when everyone else zags:

Charlie and I have no magic plan to add earnings except to dream big and to be prepared mentally and financially to act fast when opportunities present themselves. Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons. And that we will do.

Here’s a vivid snapshot of Buffett’s management philosophy:

Be aware, though, that it’s the growth of the Berkshire forest that counts. It would be foolish to focus over-intently on any single tree.

Buffett makes a conscious decision to use straightforward language. When he writes, “I’ve made some dumb purchases,” it jars the reader. What investor paints his own actions as “dumb”?

Buffett also writes with emotion. He describes GEICO as “the company that set my heart afire 66 years ago.”

Despite being worth somewhere north of $85 billion, Buffett manages to be relatable—and likable.

Buffett brings a simple concept to life: Communication should be entertaining and enlightening, as opposed to trying to sound like the smartest person in the room. That tip might not bring you billions, but it will make you an effective communicator.

Lou Hoffman is CEO of theHoffman Agency, a global communications consultancy focused on the tech sector. He blogs on storytelling in business atIshmael's Corner, where you can read more of his work.